HomeView 2015 Media ReleasesCOBA calls on Government to stay the course on FSI

COBA is calling on the Abbott Government to stay the course on the Financial System Inquiry (FSI) and to stop sending signals it is already walking away from the FSI’s reform blueprint.

COBA is calling on the Abbott Government to stay the course on the Financial System Inquiry (FSI) and to stop sending signals it is already walking away from the FSI’s reform blueprint.

“We are seeing an apparent willingness to reject the FSI’s recommendation against a deposit levy and suggestions that implementation of the capital recommendations will be delayed,” COBA CEO Mark Degotardi said.

“This is extremely disappointing.

“The suggestion that a deposit levy may be needed because of delays in strengthening capital settings flies in the face of recommendations 1 and 2 of the FSI.

“These recommendations on bank capital are the top priority recommendations of the FSI and the Government should be sending a clear message to APRA to get on with implementing them.

“The FSI found that Australia’s banking system is highly concentrated, with the four major banks having significant market influence, and that such concentration creates risks to both stability and competition.

“The perverse effect of a deposit levy is that it potentially makes the systemic risks posed by Australia’s highly concentrated banking system even worse.

“This is because a deposit levy is bad news for competition in banking as it hits the major banks’ smaller competitors much harder than it hits the major banks.

“We have four dominant banks in the Australian market and each one has been formally designated by the prudential regulator as ‘systemically important’.

“The deposit levy is a mosquito bite for these systemically important banks but it is a python squeeze for the smaller players in the banking market.

“The deposit levy is not only a new tax, it is an anti-competitive new tax.”

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